A Medicaid conundrum

By Stuart H. Shapiro

As it stands after the Supreme Court ruling, the Patient Protection and Affordable Care Act brings to mind the Apollo 13 astronaut Jack Swigert's understated line: "Houston, we've had a problem here." Except it's not Houston, but Harrisburg, Trenton, and other state capitals that have a problem.

In an unanticipated twist, the high court ruled that the federal government can't force states to massively expand Medicaid, the joint federal-state insurance program for the poor. The expansion was a core provision of the law, designed to expand health coverage to uninsured Americans earning up to 133 percent of the federal poverty level, or $30,657 for a family of four.

Now the nation's governors are at a fork in the road. They must decide whether to expand Medicaid at a time when their states are struggling to maintain current services. It's not an easy decision, and it could have long-term consequences for other programs designed to help children, the elderly, and the disabled.

Some states have already made decisions. Florida, Louisiana, South Carolina, Texas, and several other states with Republican governors have rejected Medicaid expansion. New York, California, and other Democratic-led states have embraced it.

But Govs. Corbett and Christie have yet to decide. Their cautious approach is wise, as the ramifications will be substantial. Other programs will have to be cut if Medicaid is expanded without raising additional tax revenue.

Medicaid remains one of the biggest fiscal challenges in every state. In Pennsylvania, which spends a larger share of its budget on Medicaid than almost every other state, the program consumes nearly a third of state spending, and costs are certain to rise even without expansion.

While the federal government has promised to cover the full cost of Medicaid expansion from 2014 to 2016 for families between 100 percent and 133 percent of the poverty level, its support is to be ratcheted back in subsequent years, and the costs to states will grow. Even with considerable federal support, Pennsylvania is expected to spend $721 million for newly eligible enrollees over the next six years, according to the Kaiser Commission on Medicaid and the Uninsured.

In addition, while about 2.2 million Pennsylvanians and 1.3 million New Jerseyans currently rely on Medicaid, many eligible residents are not enrolled in the program. If the states expand their Medicaid programs, outreach and enrollment campaigns could lead to further swelling of the Medicaid rolls - not only by the newly eligible, but also by those who have long qualified for the program but haven't enrolled. Policy wonks call this the "woodworking" effect.

The federal government would cover only half the costs of these patients. Pennsylvania's woodworking expenditures are expected to reach $1.3 billion, according to the Kaiser Commission, and New Jersey's are estimated at $656 million.

In the most widely cited example of this problem, Ohio estimates that in 2014 and 2015, it will cost $940 million to provide care for the nearly 400,000 of its residents who already qualify for Medicaid and will come out of the woodwork when the health-insurance mandate takes effect. Before any decision on expansion is made in Pennsylvania or New Jersey, we must have an accurate accounting of such costs.

Medicaid reimbursements for much-needed services are already woefully inadequate. If more people join Medicaid, reimbursements for current recipients will inevitably decrease, waits for services will increase, and the frayed social safety net will tear. That won't be healthy for care recipients or their providers.

In his first budget address, Gov. Corbett said the state should be funding the "must-haves," not the "nice-to-haves"; it shouldn't expand programs or entitlements unless it can afford them now and in the future, and it shouldn't roll the dice with taxpayer dollars and expect the federal government to bail it out. He was right then, and he is right now.

The irony of the Affordable Care Act is that, in its backers' zeal to provide health care to millions of uninsured Americans, they actually put some of our most vulnerable residents at risk. That is the Hobson's choice facing Corbett and Christie. Without new tax revenues or program cuts, there is simply no way to expand Medicaid.

Universal health care is a noble cause, and it's one we must continue working toward. But the all-at-once Affordable Care Act may be too much, too soon.

Because of the Supreme Court ruling, however, states may be able to proceed in ways that work for them without fear of reprisal from the federal government. The best course may be to start small and move slowly as the economy recovers. That would allow states to control costs, preserve current programs, understand the true costs of health-care expansion, and plan appropriately for the future.